On January 1, 2017, Flint Company purchased 9% bonds having a maturity value of
ID: 2334209 • Letter: O
Question
On January 1, 2017, Flint Company purchased 9% bonds having a maturity value of $330,000, for $357,062.64. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Flint Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Date
Account Titles and Explanation
Debit
Credit
Schedule of Interest Revenue and Bond Premium Amortization
Effective-Interest Method
Date
Cash
Received
Interest
Revenue
Premium
Amortized
Carrying Amount
of Bonds
On January 1, 2017, Flint Company purchased 9% bonds having a maturity value of $330,000, for $357,062.64. The bonds provide the bondholders with a 7% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest receivable January 1 of each year. Flint Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Explanation / Answer
Date Cash Received Interest Revenue Premium Amortized Carrying Amount of Bonds 1/1/2017 357062.64 1/1/2018 29700 24994.38 4705.62 352357.02 1/1/2019 29700 24664.99 5035.01 347322.01 1/1/2020 29700 24312.54 5387.46 341934.55 1/1/2021 29700 23935.42 5764.58 336169.97 1/1/2022 29700 23530.03 6169.97 330000
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